China expands property taxation pilot program News
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China expands property taxation pilot program

The State Council of the People’s Republic of China announced it will expand property taxation to unnamed regions around the nation. Currently, only residential property in Shanghai and Chongqing is subject to a property tax, since 2011.

Historically, China has eschewed the property tax to raise funds. However, President Xi Jinping has sought to implement a property tax under his “common prosperity” reforms. President Xi described his common prosperity reforms in the Chinese Community Party journal Qiushi as an effort to ensure that all Chinese citizens enjoy increased quality of life.

The property tax proposal announced Saturday has met opposition by landowners in wealthy cities such as Guangzhou and Shenzhen. Moreover, it is likely to have an impact on municipalities’ ability to raise funds by selling public land.

Real estate development has been a significant driver of economic growth in China in recent decades. One factor contributing to such growth was the lack of property tax across the country. Experts suggest that the property tax will decrease real estate speculation. Real estate speculation in China has created significant market instability in recent months as leading property developer Evergrande has struggled to pay its debts.

The property tax may significantly impact the savings of ordinary Chinese people, who hold a large proportion of their wealth in apartments and other real property. However, this will have a limited effect in rural areas. The new property tax specifically exempts validly-held rural households.